Meta Strategy Trading Portfolio – Probability Map Update.

Windows of Non-strength

Framed well this concept can form a useful basis in our search to find an edge, despite subdued effects in the current, overwhelming momentum environment.

Essential is that we think about financial markets as a probabilistic environment defined by an ever-shifting distribution of possible outcomes.

Our job is to isolate the scenarios that have the highest probability to play out.

Due to the self-reinforcing feedback-loops prevalent in the stock market, opposing scenarios can often have similar expected value.

In Jerome Powell’s annual Jackson Hole speech, stocks faced an If-Then setup: A hawkish Fed would likely have led to a short-lived, fast pullback.

A dovish Powell, on the other hand, re-ignites the positive, pre-OpEx options market flow as event volatility dissipates.

This is likely to be a tailwind for assets into the end of the month.

However, a volatile September remains a major scenario, therefore I’m happy to cautiously keep positioning very light, remain patient, and simply let my investment portfolios do their thing in the meantime.